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| TruJeans, a new startup company, plans to produce blue jean pants, customized with the buyer's first name stitched across the back pocket. The product will be marketed exclusively via an internet website. For the coming year, sales have been projected at three different levels: optimistic, neutral, and pessimistic. TruJeans does keep inventory on hand, but prefers to minimize this investment. The controller is preparing to assemble the budget for the coming year, and is unsure about a number of issues, including the following. The level of sales to enter into the budget. How to allocate the significant fixed costs to individual units. Whether to use job order costing or process costing. In addition, the controller has heard of kaizen budgeting and is wondering if such an approach could be used by TruJeans. Questions A. How could the use of variable (direct) costing mitigate the problem of how to allocate the fixed costs to individual units? B. Which cost system seems to make more sense for TruJeans, job order costing or process costing? Explain your answer. |